Morningstar | COLI's Year Through September, Booking a bit Slow but Earnings on Track
China Overseas Land & Investment reported nine-month revenue of HKD 111 billion and operating profit of HKD 43 billion. Compared with a year ago, the top line was up slightly while operating profit was up 8% year on year. The revenue run rate is about 50% of our full-year estimate, slower than that seen from a year ago. We may adjust our revenue projection down, but earnings should be well supported by higher margins. We maintain our fair value estimate of HKD 34, as well as our no-moat rating.For the nine-month period, the operating margin was higher at 40%, compared with 37% a year ago, continuing the rebound seen in 2017, reflecting the company’s gradual digestion of the Citic portfolio. Year to September, the company’s contracted sales totaled HKD 226 billion, implying a good run rate of 78% to the full-year target of HKD 290 billion. Compared with a year ago, contract sales are up 23% and 9% by value and volume, respectively. This is a respectable performance relative to most large peers. The increase of 13% in ASP will be supportive of earnings growth for the full year as some of these sales are booked. The company will likely exceed the full-year target by a small margin, leading to full-year contract sales growth of near 35%, compared with an anemic rate of 10% and 16% in 2017 and 2016. Net gearing rose to 35%, compared with 28% at interim 2018 and year-end 2017. This was attributed to land acquisitions of 12 million square meters, at the same fast pace seen a year ago. This is in line with the company’s vision of gradual scale expansion to reach its long-term sales target of HKD 400 billion by 2020.
China Overseas Land & Investment is an investment holding company. Co. is principally engaged in property development and investment, real estate agency and management, and treasury operations. Co.'s business activities are principally carried out in Hong Kong, Macau, Guangzhou, Shanghai, Beijing, Foshan, Chengdu, Nanjing, Suzhou and other regions in the China. Co.'s segments include: Property development, which is involved in the proceeds from property development activities; Property investment, which is involved in property rentals; and Other operations, which is involved in real estate agency and management services, construction and building design consultancy services.
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